No, it's not. You see to have very strong opinions about banking for someone who doesn't appear to actually know much about it. And your point is...what, exactly? A bank can't lend out more money than it has on deposits. They have to borrow money sometimes because when they lend out deposits, that deposit money is no longer available if the depositor comes in and wants to make a big withdraw. But the amount of money that they are able to lend out is always less than the total amount of deposits that they have.
"... The U.S. Treasury Department announced Nov. 3 that it intended to borrow a record $550 billion in the fourth quarter. That represents a staggering $408 billion increase over Treasury’s borrowing estimate from early August and includes $260 billion for the recapitalization of U.S. banks. There will be enough U.S. Treasury bonds to choke on, as the government tries to finance this debt. In the three months to Sept. 30, the Treasury Department borrowed $530 billion; in the first quarter of the New Year – which ends March 31 – it expects to borrow $368 billion. The March figure looks thoroughly optimistic;... I’d assume borrowing would be about $500 billion in the first quarter, even if the U.S. banking system manages to say upright for the entire quarter – something that’s by no means certain. Goldman Sachs appears to agree with this. Goldman said last week that in the year to September 2009 the Treasury would have to borrow about $2 trillion. That would suggest a rate of about $500 billion per quarter. That figure, too, is based on a belief that the recession remains fairly shallow, and that the new administration doesn’t have to add any major new stimulus programs – both pretty optimistic assumptions. ... While the gross issuance of Treasury securities has to be netted against redemptions to calculate the net increase in Treasury borrowing, $2 trillion is a lot, and net of redemptions represents about $1.4 trillion in new money. That is unlikely to come from foreign central banks, the principal source of Treasury funding in the last few years. Net foreign purchases of U.S. securities in the 12 months to August 2008 totaled $543 billion, and it was about the same in the previous year. That means $800 billion to $900 billion of new money for Treasury purchases has to come from domestic sources. Inevitably $800 billion to $900 billion of additional money flowing from domestic investors into Treasury bonds will do three things: •It will drive up interest rates on Treasury bonds. •It will tend to "crowd out" other financings, making finance difficult to obtain for medium-sized and smaller companies and more expensive even for the behemoths. •And finally, it will increase inflation, as the Fed is forced to expand money supply to give investors enough money to buy all the Treasuries. ..." From Baltimore based financial service “Money Morning” at: "http://www.moneymorning.com/2008/11/07/treasury-bonds/ Quite a deep hole GWB has dug for Obama. GWB has made two recession and more debt than ALL prior presidents combined! Why I think that despite Obama's obvious intelligence,* ability to inspire, organizational skills as his campaign demonstrated, etc. I think a sever US depression cannot be avoided now. Thank Republican "trickle down" and GWB's poor judgments made by ideological rigidity for that. ---------------- *Harvard students tend to be intelligent and to all students know who among them is extra smart, uses good judgment, etc. They selected Obama to be editor of the prestigious Harvard Law Review. There is no higher honor at Harvard.
I chuckle (and weep) every time I read the word "borrow". Yes, the pyramid scheme is about to colapse.
It can't go too far down because the economy is so big and we make so much of our own food. Even if we trade in monopoly money bread won't cost that much unless its in the big cities where families eat beans and rice at the end of their foodstamp month.
I see this topic started talking about the actual creation of money, banking, and debt, but I was intrigued by this paradigm about money. I'd agree money is a value marker that people trade. I think it's the perceived value of the majority. I thought about how I acquire money. I acquire money like most people do through my job. My job has looked at me and my skills and said that I have a certain value. They show me my value by giving me paper bills that I can in turn use and assign value to products (ie my groceries) and services (basically the internal value I assign to someone else and their skills). Really what I'm doing is trading the value that I have. I received my money by what my perceived value was. I then use the money to assign value to what products and services that perceive will add value to me and my life. I'm probably not explaining this as well as I'd like, but it seems to me, money is nothing more than the trading of value that individuals possess within themselves through a myriad of acquired skills. Even the products and services we purchase are the result of using individual skills to produce them. From this paradigm, I think there is a solution to our current economic problem. We as a nation have taken far more value from others than what we have given. If we cannot find a way to start giving value to others, I think we run the risk of others wondering why continue to support our existence. I read a post on here a while back (I wish I knew where but I don't) about an island that had 5 (this number may be wrong) Chinese and one American. More or less the story said, that the Chinese would do all the work to keep the everyone on the island alive and the American would do nothing and take the lion's share of the benefit. Finally they threw the American off the island. That's what it looks like to me currently. What do we as a nation have to offer the rest of the world that adds value to their lives? Thoughts on this?
I think you might be talking about one of my posts. The answer on what we have to offer right now is not much. It's why economic power is going to shift from us to other countries that actually produce a lot of goods, once the rest of the world realizes that it's not in their best interest to continue buying up dollars. Until we can restore our ability to compete globally with regards to manufacturing, we're going to be the low income hamburger flipper of the world.
US $$$ and debt. That's what we "offer". Putting a country in debt allows for US interests & corporations to move in - rendering the "rest of the world" into indentured servitude. btw, economic power follows military power.
The United States is by far the largest producer of goods in the world. Every year about $2.8 trillion worth of goods is manufactured in the U.S. The next largest manufacturer is China, with produces about $1.6 trillion/year. When you consider the fact that China's population is 1.3 billion while the U.S.'s is 300 million, this means that per person the U.S. produces about 7.6 times as much in terms of material goods as China. So no, I don't think your island analogy is accurate.
Hi & welcome jthomas086121 Money does have the role you described, but another important one too. It is a store of purchasing power (but not usually without some losses called inflation) For eample at the end of you work day the services you gave society may cause it to give you a drink, a dinner, and movie, but being tired you skip the movie and keep some money. A year later that money may only pay for the pop-corn at a movie but it did store some purchasing power. One of the major roles of bank interest is to get you to defer current consumption (so others can). I.e. they get a car now and pay back later and without inflation you could get a better car later than buying it now as you got interest also to pay for it. This lending of purchasing power and storing of it is very important role money plays in additon to making an otherwise barter economy much more efficient.
Money is absolutely 100% debt. Central banks loans money to countries AT interest. This means the money will be eventually owed back PLUS interest. This means the debt will never be payed off because more money will be needed to pay off the interest. But, that new money also comes with interest so more money will always be needed. That is the sole purpose of fractional reserve banking: a self-perpetuating system of debt...and enslavement of the people.
Indeed. Here is an interesting concept: About 70 percent of our national debt is owed to intergovernmental agencies and to the public. The other 30% is owed to foreign nations. What if all Americans forgave internal debts in a willing movement to keep the economy going? Impossible? Unlikely? Are we too stupid to see this as a nation? I suppose greed will be the end of many.
All countries with a central banks owes money to the central bank. You can nitpick and say this agency or this bank owes money, but when it comes down to it, it all goes back to the central bank because that's where all the money came from. Fun Fact: If America paid off all its debt, there wouldn't be a single dollar in circulation.
That is the point. Central banks are bad because they are a weak foundation for any economy. They are designed to fail. A country needs to print its own money independent of debt. ie Abraham Lincoln's green backs and the old silver and gold certificates. Even JFK seemed to have realize this shortly before he lost part of his head.
An even "funner" Fact: America would have to BORROW (at interest) from the Federal Reserve Bank to pay all its debt plus accrued interest to the Federal Reserve Bank.:deal: There is only like ~5% (or probably less) of actual "dollars in circulation". The rest of the money is just numbers on paper, in computers, or in the air. Do not, for one minute, think that the numbers written on your account statement exist as real cash stored somewhere. Banks have no problem processing a 10K or 20K check but go to the bank and ask them to withdraw 20K of "your cash" from your account. They'll tell you to come back 3 days later.
The system is more complicated that that. The way money is created can be found here: http://landru.i-link-2.net/monques/mmm2.html
Fiat money is an illussion, the dollar (top world curency but actually quite worthless) is created on necessary whims out of thin air by the government. Its value is based on faith and fear. Ordinary Joe holds or borrows bits of it on faith, extraordinary Joe (China, UAE etc.) hold trillions of it in fear knowing that if they dump it they would bankrupt the USA and also themselves in the process. Meanwhile the government prints more paper hoping that ordinary Joe will keep on striving for it in order for him to keep buying stuff from extraordinary Joe so that extraordinary Joe does not dump it. The financial system is not based on real money at all but on fantasy; the futures markets alone deals in sums far greater than all the actual money in the world.
